{"id":126529,"date":"2025-09-07T23:44:23","date_gmt":"2025-09-07T23:44:23","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/126529\/"},"modified":"2025-09-07T23:44:23","modified_gmt":"2025-09-07T23:44:23","slug":"australias-economy-remains-on-public-sector-life-support","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/126529\/","title":{"rendered":"Australia’s economy remains on public sector life support"},"content":{"rendered":"

Last week, the Australian Bureau of Statistics (ABS) issued the national accounts for Q2 2025, revealing stronger-than-expected growth.<\/p>\n

Analysts predicted a 0.4% increase in headline GDP, while the RBA expected 0.5% growth. However, a 0.6% increase was observed, driven by household spending.<\/p>\n

Household spending per capita increased by 0.5% in the second quarter, the highest increase in three years. For the first time in two years, per-person spending increased (+0.3%) year on year.<\/p>\n

\"Household<\/p>\n

Advertisement<\/p>\n

The long, grinding per capita recession ended with a 0.2% improvement in GDP per capita in the second quarter and a 0.2% increase year on year.<\/p>\n

<\/p>\n

In Q2 25, GDP per capita rose for only the third time in 12 quarters. GDP per capita increased 0.2% year on year.<\/p>\n

Advertisement<\/p>\n

Despite the increase, GDP per capita remains 1.3% lower than it was when the Albanese government took office in Q2 22.<\/p>\n

<\/p>\n

The increase in per capita household expenditure and GDP indicates that consumers have responded positively to the RBA\u2019s rate cuts, as well as last year\u2019s Stage 3 tax cuts.<\/p>\n

Advertisement<\/p>\n

Despite the modest rebound in household spending, Australia\u2019s economy remains powered by government spending and taxpayer-funded jobs.<\/p>\n

The following chart from Alex Joiner<\/a> from IFM Investors shows that public demand as a share of GDP remained at historic highs in Q2 2025.<\/p>\n

\"Public<\/p>\n

Advertisement<\/p>\n

Most of this growth in public demand has come from spending on programs like the NDIS, rather than capital investment.<\/p>\n

\"Public<\/p>\n

This spending on programs has driven a boom in non-market jobs.<\/p>\n

Advertisement<\/p>\n

As illustrated below by Justin Fabo from Antipodean Macro<\/a>, the Q2 national accounts showed that growth in hours worked in Australia\u2019s non-market industries (+0.4% for the quarter), albeit slowing, continued to outpace that in the market sector (+0.2% over the quarter).<\/p>\n

\"Hours<\/p>\n

Friday\u2019s Q2 Labour Account from the ABS reported similarly, with government-aligned non-market jobs easily outpacing the market (private) sector over recent years.<\/p>\n

Advertisement<\/p>\n

As illustrated below by Alex Joiner at IFM Investors, 650,526 jobs have been created in the non-market sector since the beginning of 2023, versus just 183,219 in the market sector. This means that 78% of Australia\u2019s job growth since 2023 has been from the non-market sector.<\/p>\n

\"Market<\/p>\n

Joiner also shows that since Q1 2022, jobs in the non-market sector have grown by 17.3%, versus only 2.8% growth in the market sector.<\/p>\n

Advertisement<\/p>\n

<\/p>\n

Finally, the following chart from Joiner plots the gross value added per hour worked across the market and non-market sectors, which is a measure of labour productivity:<\/p>\n

\"GVA<\/p>\n

Advertisement<\/p>\n

As you can see, the non-market sector has experienced barely any labour productivity growth since 2000, versus 1.3% annual growth for the market sector.<\/p>\n

Austerity measures by state and federal governments risk hammering the labour market and broader economy if the market sector fails to refire with \u2018jobs and growth\u2019.<\/p>\n","protected":false},"excerpt":{"rendered":"Last week, the Australian Bureau of Statistics (ABS) issued the national accounts for Q2 2025, revealing stronger-than-expected growth.…\n","protected":false},"author":2,"featured_media":26589,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-126529","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/126529","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=126529"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/126529\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/26589"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=126529"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=126529"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=126529"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}